Global trade upended as Trump's tariffs of 104% on China, 20% on EU take effect

Wednesday 09 April 2025 - 09:05

By: Zahouani Ilham

Global trade upended as Trump's tariffs of 104% on China, 20% on EU take effect

Global trade dynamics took a sharp turn as former U.S. President Donald Trump implemented sweeping tariffs on a range of international imports. The new duties, which took effect Wednesday, include an unprecedented 104% tariff on Chinese products and a 20% levy on goods from the European Union, signaling a significant escalation in his protectionist trade agenda.

These tariffs, described by Trump as “reciprocal,” have intensified fears of a global economic slowdown, rattling stock markets and threatening longstanding international trade frameworks. Within just four days of the announcement, the S&P 500 lost nearly $6 trillion in value—its worst performance over such a short period since its inception in the 1950s. The index is now nearing bear market territory, typically defined as a 20% drop from recent highs.

Market instability spread across Asia, with Japan’s Nikkei Index falling by 3%, South Korea’s currency reaching a 16-year low, and government bonds experiencing sharp declines as investors moved towards cash. European and American stock futures also signaled continued volatility. Meanwhile, Chinese markets remained stable due to strong support from state institutions.

Although Trump has labeled the tariffs as permanent, he has also indicated they serve as leverage for negotiation, suggesting that several countries are now seeking trade talks with the U.S. Meetings have already been planned with South Korea, Japan, and Vietnam, and Italian Prime Minister Giorgia Meloni is expected to visit the White House soon.

Earlier optimism over potential deals briefly boosted U.S. markets on Tuesday, but gains were reversed by the end of the trading day.

The standoff with China intensified after Trump nearly doubled tariffs on Chinese imports—from 54% to 104%—in retaliation for new duties imposed by Beijing. China has promised to resist what it considers economic coercion, and major Chinese financial firms have pledged to help stabilize their domestic market.

In response to economic fallout, central banks in New Zealand and India cut interest rates, potentially marking the start of a broader monetary policy shift. South Korea announced fiscal support for its automotive sector, including tax breaks and subsidies.

Economists caution that American consumers could end up shouldering the costs of the trade war, with price hikes likely on everyday products ranging from footwear to wine. A recent Reuters/Ipsos poll shows that nearly 75% of Americans anticipate price increases in the coming months.

However, the full impact of the latest tariffs may take time to emerge. Goods already en route to the U.S. as of the effective date are exempt from the new duties, provided they arrive before May 27.

Last Saturday, Trump also imposed a general 10% tariff on imports from numerous countries. The current round of levies, effective at 12:01 a.m. ET on Wednesday, targets countries Trump accuses of exploiting the U.S. economically—including allies like the EU, which now faces both general and industry-specific tariffs. The EU is expected to vote on initial retaliatory measures shortly.

Trump argues that the tariffs are necessary to address trade imbalances and reduce barriers to U.S. exports. He has also accused nations such as Japan of manipulating their currencies for trade advantages—a claim Japan denies but may address in upcoming negotiations.

Furthermore, Trump hinted that additional tariffs are on the horizon, particularly targeting pharmaceutical imports, a sector that had previously been exempt from his tariff agenda.